The Weekly Extract from Extractable is a condensed roundup of digital experience news for financial services institutions, and our take from San Francisco.
This week, four experts weigh in on the secret sauce of successful transformation. We cover the continuing desire to build FI / fintech partnerships, and finally, we discuss what it means to be truly customer-centric.
Winning Digital Transformation: 4 Experts Weigh In
As we roll into the next month of shelter-in-place across the country, the acceleration of digital transformation continues. As need rises, experts across the industry are weighing in on their “recipes” for successful digital transformation.
“For starters, the relatively small minority of consumers—25%—who plan to make less (or no) use of branches going forward is a pretty weak argument for transformation. Who says that they won’t start using the phone to make voice calls to call centers more often?” He continues:
“Banks are not ‘moving quickly’ to providing ‘personalized solutions that can be delivered seamlessly’. That simply doesn’t happen in a three-month time frame, and especially during one when financial institutions are scrambling to adapt to a crisis”.
At Extractable, we too continue to decry the notion that transformation is just digitizing a few customer touchpoints. Digital transformation is transformative.
Ron highlights steps that are required for a true digital transformation; including the complete overhaul of legacy systems, maturation of AI, enabling a new generation of executives, and more events like COVID that will drive the industry to change.
We were particularly intrigued by the point Ron makes about propping up a new generation of executives. The point brings to mind an anecdote from my many years in banking. A commercial banking executive once canceled all digitally-related projects for commercial banking because “businesses only want to do business with people not with machines”. He is still an executive making strategic decisions for the business.
“the banks have also realized that cannot dwell more on the subject (of digital transformation) and will have to rapidly start creating a smarter digital banking framework if they want to sustain themselves in the immediate and long-term future”.
Menezes’ “recipe” for digital transformation focuses on user experience — our passion here at Extractable. He notes the key UX factors to consider:
- Simplicity of the UI
- Attractive UI
- Transparency and security
- Mobile-first approach
While Shevlin and Menezes arrive at different focal points, all are important when undertaking true digital transformation. We also recommend a read of Andrew Cornell’s column in ANZ Bluenotes covering the impact of COVID.
“The work summarized four fundamental shifts brought on by COVID-19:
- Forced adoption of online, mobile and call centers
- Overnight virtualization of workforce and ways of working
- Tipping point for digital and contactless payments
- Evolution of underlying market structure and economics”
Like Shevlin and Menezes, Chris Skinner defined five themes necessary to survive COVID:
- Organizational foundations
- Talent and culture for an innovation mindset
- Successful transformation strategy and execution capabilities
- External collaboration and proactive engagement
Moreover, the impacts of COVID-19 have brought a new urgency for digital transformation. However, institutions interested in creating meaningful digital transformation will change from the inside-out — not just digitize the status quo.
Fintech Partnerships Gaining Ground
As Skinner notes above, external collaboration and proactive engagement will be a key factor in surviving the impacts of the pandemic.
At Extractable, we have noted an increased interest from our clients in partnering with fintech firms. Lydia Beyoud writing for Bloomberg Law highlights collaborations between financial service companies and fintech firms during the crisis. Beyoud writes:
“Many banks rushed to onboard new fintech vendors that provide customer due diligence, loan underwriting, and other services needed to swiftly get funds to small businesses harmed by the coronavirus pandemic”.
PYMNTS also had an excellent run down of recent FI partnerships with fintech firms this week. PYMNTS notes that for community banks, the decision to “build, buy or partner” has been leaning heavily towards partner. PMNTS notes that “…the partnering strategy can fast-track digitization initiatives”.
Beyoud cautions that the rush to partner with fintech firms, however, has highlighted antiquated vendor management and customer due diligence processes. As we noted in an April blog, financial institutions’ processes prevent them from onboarding vendors quickly. Beyoud adds that FIs worry about all the “what ifs,” and would like clearer rules from regulators.
“Community banks would like regulators such as the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency to give clearer guidance about onboarding new service providers, said Chris Cole, ICBA’s executive vice president and senior regulatory counsel.”
As we discuss fintech partnerships with clients, we have noticed a more open attitude towards streamlined and innovative due diligence processes. We are excited that Fis are finally taking notice of the increasing calls to reframe the vendor on-boarding process.
What Makes an FI Customer-Centric?
This week Nitin Rakesh, CEO of Mphasis, had an excellent article in Forbes where he calls for companies to pivot “toward a nimble, digital-driven business model.” In the past months, we have detailed the many calls throughout industry for such transformation. He writes,
“When firms realize what it means to be customer-oriented, organizations adopt a 360-degree transformation, rewiring business approach, operations, work culture and IT architecture”.
Of course, the problem remains — how and when will organizations come to this realization?
In the Financial Services industry, we see adoption of new models on the edge — whether it’s a digital-only brand with no relation to the main business, or an innovation team that is just another silo within the organization.
Rakesh gives two examples of organizations that have made such commitment, Singapore’s DBS Bank and P&G. In the case of DBS, Rakesh notes that the proof that the bank has truly transformed is the accolades they are received.
“It became the first bank to simultaneously hold the title of “World’s Best Bank” (Euromoney), “Best Bank in the World” (Global Finance) and “World’s Best Bank” (The Banker) in 2018 and 2019. The bank also earned recognition from the Harvard Business Review as “one of the top 10 transformations of the decade,” alongside Netflix, Amazon and Microsoft”.
Agility and a focus on customer experience define the strategy that these organizations have taken towards transformation. Rakesh notes:
“in tomorrow’s world, customers will be drawn to products and services customized for their budgets, ethical concerns and specific requirements. Businesses that reinvent old approaches to keep pace with changing customer needs will be the ones that stay relevant”.
Rakesh’s points echoed those noted by Martin Zwilling, Founder & CEO at Startup Professionals, in an article in Inc. Zwilling writes about strategies to drive exceptional brand loyalty. However, we believe that the strategies he notes can drive business strategy overall.
Zwilling calls for brands to “make every customer experience a memorable one”.
How many financial service companies can say that they have examined every customer experience with that lens? I remember getting my first Simple debit card several years ago. I can’t recall ever receiving any other debit card — even those that I have received in the past year.
If you don’t understand why I would remember the simple act of receiving a card from Simple, it’s because you don’t have an account there.
“Every employee must exude passion and loyalty”, writes Zwilling. This recalls another experience I had a few years ago, after calling Zappos with a request they couldn’t fill. The agent and I went to a competitor’s website, we discussed the choices on their site and he helped me decide to buy shoes from a competitor. A week later, he sent me a note telling me he also bought the same shoes. Where do you think I buy all my shoes today?
“Appeal to all your customers’ senses all of the time,” adds Zwilling. Unboxing Apple products is always a delight. I expect the same from all products and I’m disappointed 75% of the time. When will FI’s appeal to this same sense of delight?
Zwilling tells brands to “convert customer interactions into relationships”. A few weeks ago, I needed to get cash to pay a tradesman that would not take any other form of payment. My main bank and others that I deal with were of no help. Chase came to the rescue, and despite only having a minor account with them, they made sure I was able to get the cash I needed during the pandemic. My wife is now lobbying for us to change our accounts over to Chase.
“Go beyond asking customers how they want you to improve.” Recently, we at Extractable discussed the fallacy of customer surveys. We all agreed that most customers cannot drive innovation — but they can help shape it. This brings to mind the oft-quoted saying from Henry Ford “If I had asked people what they wanted, they would have said faster horses”.
Zwilling’s final point had us nodding in agreement as well: “highlight only larger customer-focused initiatives”. I recall the community bank that sent me a message with great fanfare about their latest financial education portal. After clicking to the portal, I was rewarded with the sight of the old portal — reskinned with new graphics and a new name.
We understand that fanatically focusing on customer experience is something that most financial service companies struggle with. It isn’t part of their DNA, despite their repeated assurance that they differentiate through customer service. However, it will be a necessary facet of any meaningful transformation — digital or otherwise. Increasingly, FIs are compared not to other FIs, but to the Zappos, Ubers, and Amazons of the world; those who have mastered customer experience at scale.
If you interested in hearing more about transforming into a truly customer-centric organization, reach out to us at Extractable.